The BoJ's rosy outlook

The Bank of Japan has left things unchanged at the meeting early today in Asia. They have acknowledged the risks to slowing economies in the rest of Asia they seemed too upbeat about the prospects of a turnaround.

In the statement the BoJ said that a virtuous cycle in will come from domestic spending and a rebound in exports from other Asian economies coming out of their downturns. This seems a bit optimistic and many economists that were surveyed by Bloomberg still believe there will be more stimulus added by the summer.

​One of the biggest problems that I am glad to see in the statement is that the confidence of businesses will have to change in terms of inflation. The inflationary mindset will be the biggest hurdle to the success of Abenomics and this can be monitored by looking at the cash on the sidelines (and still in JGBs). With a proper inflationary mindset there will be more cash used in investments into companies and people to grow and outpace the expected inflation rate. With the Yen in a stronger position over the year and the economy of Japan still not confident in growth after the latest GPD numbers, the Central Bank will have to do more to change confidence.